March has become a month for sports fans synonymous with NCAA college basketball and "March Madness." Offices hand out the tournament brackets and basketball aficionados and novices all fill out their sheets hoping for the pot awaiting the first Monday in April. We all try to get a leg up reading about "who's hot," "who's not," "who's injured," and "who's got the easiest road." Then on the first Thursday through Sunday, our brackets are busted when a fifteen seed beats the two seed you we had going to the Final Four or that "hot team" cools off in the first round and gets upset by East Bumbleton State! Last year in the markets, we saw our brackets get busted when a tsunami devastated Japan and one of the largest world's economies. The threats from debt default in Greece, Portugal, and Spain were a constant drag on markets. Weak housing and job creation, Congressional infighting, and lack of consumer confidence all were "bracket busters." The Fed's scheduled ending of QE2 was the final push that led to the summer sell-off after our brackets had survived the first half. The second half of 2011 was brimming with volatility paralyzing most investors.
So what is different about this year's markets metaphorically described as brackets? There's no denying that some things are better. Two-hundred thousand plus jobs are being creating each month and certain regions are showing some housing resurgence. Corporate earnings continue to be solid and generally, people are feeling better about their plight. Volatility is in hibernation casting a complacency in markets.
However, Europe's debt situation has been papered over and will be the usual five seed upsetting a 12 at some point. Geopolitical issues exist as the real threat of an Iranian/Israeli conflict is a possibility. High oil prices could be the real upset to the our fledgling economy as we close in on four dollars a gallon oil. The grind of higher fuel costs will eventually impact corporations especially as they forecast 2013's earnings.
So what does it mean for 2012's brackets? Undoubtedly, we will see "upsets" in the near future as markets have run so far so fast in the first 2 1/2 months. We are also likely to see major upsets in the second half of 2012. We will continue to take advantage of opportunities that are presenting themselves currently. As we enter the summer, we will be making our selections cautiously. We will be faced with deciding when to take some profits and perhaps even get more defensive.
Our goal is to help your brackets be the big winner. Unlike "March Madness," markets will have their winners and upsets throughout the remainder of 2012. We have a much longer tournament ahead and will navigate accordingly.